CHP 11
block pricing
another example of second degree price discrimination. practice of charging different prices for different quantities or "blocks" of a good.
two part tariff
form of pricing in which consumers are charged both and entry and a usage fee. ex: buy the razor then have to buy the blades
reservation price
max price that a consumer is willing to pay for a good
second degree price discrimination
practice of charging different prices per unit for different quantities of the same good or service. ex: single roll of kodak film is $5 and a box containing 4 rolls is $14 making the avg price per roll $3.50. sell to low end consumer at highest possible price, discount high end product so high end consumer doesn't buy low end product
price discrimination
practice of charging different prices to different consumers for similar goods
first degree price discrimination
practice of charging each customer her reservation price. total welfare increases but consumers walk away with no consumer surplus
third degree price discrimination
practice of dividing consumers into two or more groups with separate demand curves and charging different prices to each group. ex: movie tickets discounts to students and senior citizens
tying
practice of requiring a consumer to purchase one good in order to purchase another
bundling
practice of selling two or more products as a package. ex: microsoft office
pure bundling
selling products only as a package
mixed bundling
selling two or more goods both as a package and individually
variable profit
sum of profits on each incremental unit produced by a firm; i.e., profit ignoring fixed prices